BUT IT is AN EXCLUDED CONCURRENT CAUSE.
A recent long opinion by a Federal Judge in Pennsylvania reached twin conclusions concerning asserted CatClaim damages. First, the Federal Judge reasoned that there was no Insurance Coverage. Second, and as a direct result, the Federal Court held that no Bad Faith claim could survive upon which relief could be granted (although fraud is a possibility). Subscription-required citations are given below, and here is the name of the case and public access to this very long decision: Download T.H.E. Insurance Co. v. Charles Boyer Children's Trust d.b.a Boyer's Westwood Lanes (M.D. Pa. Case No. 3.CV-04-1652 Opinion Filed October 11, 2006)..pdf
The insurance company filed a Declaratory Judgment action. It wanted the Court to declare that the First-Party Insurance Coverage of its Commercial Lines Insurance Policy does not apply to the loss claimed by its Policyholder, a bowling alley. The policy contains an Exclusion for damage caused by "water" including "loss or damage caused directly or indirectly" by, among other things, "surface water". The policy also contains a provision that such loss or damage is excluded regardless of any other cause "that contributes concurrently or in any sequence to the loss."
The Policyholder estimates $2,000,000.00 in damage. The Federal Judge wrote that it is "undisputable" that the claimed damage was caused in whole or in part by water that flowed into the bowling alley to a depth of over 3 feet. It "is indisputable" that water accumulated outside an eastern door of the bowling alley that "was derived from torrential rains", the Federal Judge further wrote. There is also "no dispute" that the water in question rose over 4 feet outside that eastern door. The door collapsed, and the claimed damage resulted.
Although the Federal Court promptly determined that the damage-causing event was not subject to the same policy's Flood Exclusion, the Court also addressed the policy's Exclusion for damage caused by "surface water". Surface waters are defined by the Pennsylvania Courts in much the same way as Courts in other States have defined that term. It is judicially defined to mean, in basic terms and as analyzed by the Federal Judge in this case, "derived from falling rain or melting snow," and it is "diffused over the surface of the ground," and surface water does not follow a definite course as would be the case in streams, lakes, and ponds.
"It is thus evident that the damage to the bowling alley was caused by 'surface water,' whether it came from the parking lot or from the embankment south of the building. Courts have consistently held that rainfall that collects outside a building and subsequently flows into that building is 'surface water' for purposes of the surface water exclusion." Thus held the Federal Judge on these facts, concluding that there was simply no Insurance Coverage. The Court granted the First-Party Insurance Company's motion for summary judgment and denied the Policyholder's motion for summary judgment in this case accordingly.
Since there was no Insurance Coverage, the Federal Court resolved the Policyholder's First-Party Bad Faith claim against the Policyholder and in favor of the Insurer in a footnote, leaving open the posssibility of a claim for fraud which the Policyholder had also alleged: "While this ruling necessarily means that Defendant [the bowling alley-Policyholder] cannot recover on its contractual and statutory bad faith counterclaim, it may not necessarily foreclose Defendant's counterclaim for fraud." Footnote 10 of the Federal Court's Opinion.
The Court is scheduling a telephone status conference for Thursday, October 26, 2006. Perhaps the attorneys of record in that case for the prevailing party will advise us of the outcome after the telephone status conference, which we would all appreciate. Here are the subscription-required citations for this new decision: T.H.E. Insurance Co. v. Charles Boyer Children's Trust d.b.a. Boyer's Westwood Lanes, ___ F. Supp. 2d ___, 2006 WL 2923223 (M.D. Pa. Case No. 3:CV-04-1652 Opinion Filed October 11, 2006).
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